Being an expatriate in a foreign land comes with many challenges. There are the relocation costs to account for – unless your company is paying for them – opening a new bank account, building a credit history with the banks, finding appropriate schools for your children at an affordable cost, and then of course learning to speak the native language. With all of that to think about, it’s no wonder that many forget to take time to source an appropriate international medical insurance plan that fits in with their budget and provides for medical evacuation.

As an interGlobal Member you can rest assured that if you suffer a critical medical condition and you can’t receive adequate treatment locally, we will evacuate you and your insured family to a more appropriate facility – which could be in another country altogether. Even if your condition isn’t critical, if we feel it’s medically necessary to find you more suitable medical care, we will always consider evacuation if that is the best option for you.

Unfortunately though for those who don’t consider it necessary to have international medical insurance cover, much less a plan that covers them for evacuation, the cost of that decision can end in financial ruin.

You see, dependent on the location from which a patient has to be transported, distance to be flown and the type of aircraft, a typical medical evacuation by air ambulance can start at anywhere from US$5,000 to upwards of US$100,000.

Most international medical insurance providers would cover all related costs up to an overall plan limit, greatly reducing the financial or emotional stress for the member and their loved ones.

Case files

Disaster in Japan costs over US$180,000

An accident or other disaster abroad can quite often amount to a financial catastrophe for most people. Too often, there are media reports of expatriates involved in mishaps abroad and either having no insurance or for a variety of reasons having their claim declined by their insurer, leading to friends and family having to raise funds to help repatriate them. InterGlobal’s PMI Cover is designed for just such eventualities.

An example of this was a case where a British expatriate working in Japan had a life altering experience. A serious accident meant the expatriate needed to be repatriated to recover at home.

InterGlobal’s repatriation benefits enabled the member’s family to accompany the patient on the journey home for treatment. Our InterGlobal Assistance team arranged and worked with an airline to provide a complete intensive care unit, medical facilities and experienced medical staff on board an aircraft to enable the repatriation to take place in the safest possible way. Whilst back home, our team assisted in ensuring that the member was admitted to an appropriate hospital for further treatment and care.

The member’s evacuation and medical care costs amounted to over US$180,000. An amount that, had the cover not been in place, would have resulted in an additional financial burden and trauma for the family.

“Our role in situations such as these is to ensure that our customer’s care and well-being is a top priority. We therefore ensure that they receive all the support and assistance they require to enable the situation to be managed appropriately,” said the InterGlobal Country Manager handling the case.

Investments structured as life insurance products help minimise damage when you leave Japan, and indeed while you are here, as they can be reported but aren’t taxable unless you take money out at a profit (this means all unrealised capital gains are shielded from taxes). The new Japan exit tax is applied to financial assets valued JPY100m and more, and a life insurance product currently doesn’t fall into the financial asset category. The exit tax will apply to foreigners from 2020.

Also, the obligation to report overseas assets if their aggregate value was JPY50m or more by the calendar year end is already in force for all Japan tax residents. With legislation like FATCA and the OECD’s Common Reporting Standard (CRS) in place, more and more of our financial data gets automatically exchanged, so the authorities in Japan, who will join the CRS in September 2018, will become aware of assets held wherever they are held, if they aren’t aware already. So again if they are held in an insurance wrapper they can be easily reported but aren’t taxable unless you take a profit out (this means all capital gains are shielded from taxes). At which point one can plan to take things out when one is in the best tax friendly jurisdiction possible to mitigate as much tax or all if possible.

If you are interested in taking a closer look at life insurance products, their benefits, cost, etc., do let me know and we will send you information.

And it’s also a worry if you do. Reporting it in tax returns, for example. Being taxed. Or paying penalties for not reporting it in tax returns.

Here’s a summary of the changes to reporting requirements on residents of Japan that are being put in place this decade.

Since 2014 Japan foreign residents have been obliged to report assets of more than JPY 50,000,000 held outside Japan. This is a combined total, not the minimum reportable size of any one asset. We haven’t seen the form for doing so nor been asked to declare in making our tax returns, but that’s the official requirement.

The ‘my number’ system was instituted at the beginning of this year, 2016. Every Japan resident was sent one. Not much has happened with these my numbers yet. We’ve heard of a few people who had to quote theirs while making foreign exchange remittances. They weren’t used in tax returns this year but we understand that they will be next. My number offers a way for the authorities to track the financial affairs of any individual more closely. Whether tax offices in Japan will use my numbers systematically is a matter of case-by-case conjecture, but they can.

The OECD Common Reporting Standard is a sign-up of 54 countries which have agreed to share financial information about their residents as of September 2017. Another 26 countries will join as of September 2018. Japan amongst them. This means assets you as a Japan resident may hold in other countries on the list will be visible to the Japanese authorities.

An exit tax was imposed on wealthy residents of Japan as of June 30th Anyone leaving Japan for good with more than ¥100 million in financial assets will be liable for tax on those assets as if they had sold them at the point of departure—even if the assets have not been sold. A case of the authorities getting their pound of flesh even if the cash cow is not yet dead. One bright side to this new law is that foreign residents of Japan will not be liable to this provision for five years: June 30th 2020.

What to do, if you fall into the wealth is a worry category?

Investments written as life insurance provide mitigation against ongoing taxation. The issuing life insurance company owns the assets; you own a contract for the value of the assets. This is the standard structure for the UK offshore finance industry and has proved viable for 50+ years. You can declare the existence of the policy, the policy can increase in value, but there is nothing to tax. Convenient, simple, effective. Please contact us for advice on how to protect your financial assets in this way.

What to do, if you fall into the no wealth is a worry category?

Start a regular savings programme, structured as life insurance, and build up some wealth. Every little bit adds up in time, with the power of compound interest. These policies also are reportable but tax-sheltered. Please contact us for information about how to get started. We all have to start somewhere.

Maximizing Your Social Security Benefits

By Dr. Larry Kotlikoff

Social Security benefits are a big deal, income wise, for most retirees. For 20 percent, it’s the only deal. For 30 percent it’s the main deal. And for another 20 percent, it’s the second biggest deal. So it’s passing strange, to use a Mark Twain expression, that most households, be they poor, middle class, or rich leave tens to hundreds of thousands of dollars in Social Security benefits on the table.

You can be the smartest person in the world and make the dumbest Social Security mistakes. My friend, Glenn Loury, a brilliant economist at Brown University, is an example. Glenn is a widower. His magical wife, Linda, tragically passed at 58 after a distinguished economics career at Tufts.

Glenn and I had dinner one night a few months shy of his 65th birthday. Somehow we got onto his Social Security plans. Glenn knew next to nothing about widower benefits. When I mentioned them, he dismissed the idea saying he had earned too much compared to Linda.

Glenn was wrong. Within two minutes I made him $120,000. The strategy was simple. Glenn, who was still working, would collect his widower benefit starting at his full retirement age, 66 (when Social Security’s stops applying their their earnings test that taxes the benefits of those still working).

Given Linda’s salary, Glenn’s widower benefit would, I figured, total more than $30,000 a year for four years. Meanwhile Glenn would let his own retirement benefit grow by 8 percent per year through age 70. Since Glenn had been planning on taking his own benefit at 70, the $120,000 was found money. Needless to say, Glenn paid for dinner.

How I Became a Social Security Expert

I learned about Social Security by necessity. I’m an economist at Boston University, but I have a personal financial planning software company, whose website is www.economicsecurityplanning.com. Our goal is to find safe ways to sustain and raise people’s spending power. And there are many such ways, particularly taking Uncle Sam’s best benefit and tax deals.

One of our programs, www.maximizemysocialsecurity.com, sells for just $40. But it considers each of your potentially millions of benefit-claiming strategies, finding precisely the one that will maximize your household’s lifetime benefits. Creating this program required learning Social Security’s rules, which I did at great cost to my sanity.

The system’s Programming Operating Manual System has hundreds of thousands of rules about those 2,728 rules. The number of potential benefits, legitimate months for initiating collection of the various benefits, ways in which one spouse’s benefit collection decisions can affect the other’s, and all the rules within rules limiting what you can receive and when you can receive it makes Social Security far more complicated than even the federal income tax. This is why www.maximizemysocialsecurity.com needs to consider so many cases.

Becoming a Social Security Columnist

As a “reward” for learning all the mind-boggling details, Paul Solman, my friend and long-standing economics correspondent at PBS NewsHour, asked me to write a weekly column for the PBS NewsHour’s website answering Social Security questions. Three and half years later, the column is still one of the site’s top draws.

Given the huge thirst for Social Security answers, Paul and I, together with www.money.com columnist, Phil Moeller, decided to write a book describing the best strategies for collecting Social Security. The book, Get What’s Yours – the Secrets to Maxing Out Your Social Security was released in February 2015 and instantly became a #1 NY Times Best Seller.

Unfortunately, the book’s success had untoward consequences. The White House, we learned, didn’t like the idea of our telling people how to get what they paid for. In November, as part of the 2015 Budget Bill, they teamed up with Congress to change Social Security’s rules, taking away certain claiming options for many younger households.

From one day to the next, my company’s software and my co-authored Best Seller were out of date. This was no fun, to put it mildly. But my company’s exceptional engineers fixed our software within two weeks, and my co-authors and I immediately started rewriting our book. Our marvelous publisher, Simon & Schuster, also went into crash mode. They just released Get What’s Yours – the Revised Secrets to Maxing Out Your Social Security.

Three General Rules to Maximizing Your Lifetime Benefits

Our book became a best seller in part because Paul’s is an exceptionally funny writer and because Phil and I pulled no punches in describing Social Security as a bureaucrat’s daydream and a user’s nightmare. But the main draw was distilling Social Security’s gobbledygook into English and providing four central strategies for getting what’s yours.

Rule 1 – Be patient where patience pays.

Take a high-earning 60 year-old couple. Under the new law, they both make too much and are both too young for either to collect spousal benefits from the other. If the lower of the two earners dies first, the survivor can, however, collect a widow(er) benefit. But the immediate issue for this healthy couple is when to take retirement benefits.

If they take their retirement benefits as early as possible – at 62, they’ll receive $1.30 million in lifetime benefits (present valued as of their current age 60). If they wait till 70, the figure is $1.65 million. That’s an extra $350,000! It too represents found money. If the couple takes their benefits at 62 and finds $350,000 hidden in their attic they’d be in the same boat (ignoring federal income taxes). Had the law not changed, the $350,000 in found money would be $410,000. But $350,000 is still a massive bonanza.

Why does patience pay so much? The answer is that Social Security pays much higher benefits if you wait to collect them. For example, retirement benefits starting at 70 are 76 percent higher than those starting at age 62. This is above and beyond the annual adjustment for inflation. And these benefits continue for as long as you live.

Most people view Social Security as an asset, like any other. But it’s actually insurance – insurance against the worst thing that, financially speaking, can happen to you in retirement – you keep living! Dying early and not collecting your benefits entails no financial risk. You are, well, dead. But you’re also in heaven, where everything is free and there are no regrets. In particular, you aren’t sitting around kicking yourself for having not taken Social Security before you died.

No, the real financial danger in retirement is not dying. It’s living — living to the ripe old age of, say, 100. It’s a danger because you have to keep paying for yourself, day after day, month after month, year after year. If the money runs out, things can get mighty unpleasant as anyone who has tasted cat food can attest.

Much of our book’s success involved implanting the following simple thought in our readers’ brains — You can’t count on dying on time. Nor can you analyze Social Security on a breakeven, i.e., play-the-odds basis.

Insurance companies can play the odds. They can pool over their thousands of clients’ death dates. You can’t pool. You have only one life to lose and you could lose it at your maximum, not your expected age of death. As with any insurance, when it comes to Social Security’s longevity insurance you need to consider the worst cast scenario and make sure to get catastrophic coverage. With Social Security, this means, in most cases, waiting till 70 to receive your highest possible retirement benefit.

Many rich investors poo poo treating Social Security as insurance. They are so well heeled they don’t worry about risk, including longevity risk. But if they are smart, they will also wait till 70 to take their retirement benefits unless there is an even better way to maximize their family’s collective benefits (see below). The reason is that even on a pure investment basis, waiting to collect higher retirement benefits is a no brainer. In deciding in the 1970s ago how much to reward patience, Social Security used actuarial tables that are now decades old. They also used a safe internal rate of return that was over 200 basis (2 percentage) points higher than you can now earn on 30-year TIPS (Treasury Inflation Protected Securities). These factors make patience a terrific arbitrage opportunity.

Rule 2 – Understand All Your Benefits

I listed above the 12 different types of benefits you can collect from Social Security. You may be focusing on only one or two of these benefits right now thinking the others aren’t relevant. But you never know what might happen. My 96 year-old mom is my financial dependent. Were I to croak, she could collect 82.5 percent of my full retirement benefit instead of her own lower benefit. I made a special point of telling my siblings this fact. They two are very well educated people (my brother is the Provost of Cornell and a leading scientist), but they had never heard of the parent benefit.

With Social Security there is a host of gotchas. (We list 40 bad news gotchas in one chapter in the new book and 60 good news secrets in another.) Perhaps the worst gotcha is Use It Or Lose It.

Had Glenn not mentioned Social Security, he’d probably have lost $120,000. Benefits that aren’t taken on time are gone. (That’s not 100 percent true. In some cases, you collect 6 months of benefits retroactively.) Another top economist, this one at Harvard, called me recently about what to do with Social Security. He hadn’t read the book or run the software. When I explain he’d called three years too late and had lost $35,000 in spousal benefits, he was none too happy. Then there was a recent email from a 75 year old who was still waiting for Social Security to start sending him his retirement benefit, for which he had never applied.

Let me be clear. Social Security doesn’t know or very much care about you. They don’t know if you are alive or dead, if you are married, if you are divorced, if you are widowed, if your ex is deceased, if you have children, if your kids can collect benefits on your record, and the list goes on. You need to tell them, not ask them what you can collect and when you want to start collecting it.

Rule 3 – Time Your Collection of Benefits

One of Social Security’s worst gotchas is that you can’t take two benefits at once. If you are entitled to collect two benefits simultaneously they will give you either exactly or approximately the larger of the two. To collect two benefits, you need to take one first, while letting the other grow and then take the later benefit when it stops growing. This was the strategy I laid out for Glenn – take widower benefits at 66, hold off retirement benefits, letting them grown by 32 percent between 66 and 70, and then take retirement benefit.

In the case of married couples, the optimal timing of benefit collection often has to be coordinated between spouses. Take a hypothetical couple I ran through maximizemysocialsecurity.com to discover the best strategy. Let’s call the husband, age 64, Ted and the wife, age 60, Joan. Joan is the higher earner. Ted is thinking of taking his retirement benefit immediately and Joan is considering starting hers at 62. Can they do better? They certainly can.

Thanks to the grandfathering provisions of the new law, Ted can collect just a spousal benefit on Joan’s work record between 66 and 70 and take his own retirement benefit at 70. But for Ted to do this, Joan has to take her own retirement benefit at age 62. Yes, this is the opposite of being patient. But at 66, Joan can suspend her retirement benefit and restart it at a 32 percent higher value at 70. Joan will still reduce her own lifetime retirement benefits, but the couple’s combine lifetime benefits will end up $155,053 higher!

Here’s another quick hypothetical example of how timing can matter. Jerry is 61 and just retired after a career as a middle manager. Jane is 45. She’s been a top-paid lawyer, but is retiring to look after their severely disabled son, Charley. Their optimal strategy is for Jerry to take his retirement benefit at 62 at which point Charley can start collecting a disabled child benefit and Jane can receive a child-in-care spousal benefit. Thanks to the new law Jerry can’t suspend at full retirement age without cutting off Charley and Jane while his retirement benefit remains suspended. So he ends up stuck forever with his age-62 retirement benefit. At 70 Janes take her retirement benefit. At this point Charley starts collecting on Jane’s work record. When Jerry dies, Charley collects a child survivor benefit on Jerry’s record. Finally, when Jane die, Charley starts collecting as a survivor on Jane’s record. This multi-step strateg y can also produce a major gain in the family’s lifetime benefits.

Rule 4 – Tell, Don’t Ask Social Security What To Do

The staff at Social Security are overworked, underpaid, and undertrained. Most are well meaning. But a vast number are arrogant beyond belief. I’ve written about case after case where multiple Social Security staff have told the same person something that was 100 false while claiming they were 100 percent correct. In almost all of these cases, only my threat of writing up their mistake in my column led the staff or Social Security’s top brass to fix the problem. Indeed, I could write an entire book about the nature of Social Security’s “advice,” its failure to comprehend longevity risk, and why I would, were I elected President, fire the Social Security Commissioner on my first day in office.

My advice is read our book. It’s very inexpensive. Buy it from the local bookstore if possible or Amazon or Barnes and Nobles if necessary. Read it, then run the software. Then you’ll know exactly what to order not ask from Social Security.

Fixing Social Security for Real and for Good

My goal of becoming President is, actually, extremely serious as you can see at www.kotlikoff2016.com. Part of my platform, provided on that site, involves replacing the antiquated Social Security system with one that’s solvent and simple, indeed, one that requires not a single government bureaucrat to operate. Social Security, by its Trustees’ own admission in their 2015 Trustees Report, is in the red to the tune of $26 trillion. That’s far larger than a year’s GDP! Stated differently, the system is 31 percent underfinanced. I.e., it needs a 31 percent immediate and permanent hike in its 12.4 percent FICA tax to pay all promised benefits through time. Make no mistake. The $26 trillion is a massive bill we are dumping squarely in our children’s laps. It’s part of the far larger $199 trillion present value fiscal gap separating all future projected federal spendin g and all future projected federal taxes. The longer we wait to address our overall fiscal gap and Social Security’s in particular, the greater the economic damage to our children. This is why, It’s Our Children, not Vote for Me Because I’m Richand Brilliant or Vote for Me Because My Name Ends in Clinton is my campaigns’ one and only sound bite.

Laurence Kotlikoff is a professor of economics at Boston University, a fellow of the American Academy of Arts and Sciences, co-developer of www.maximizemysocialsecurity.com, and co-author of Get What’s Yours – the Revised Secrets to Maxing Out Your Social Security.

On 31 March 2015, the Diet passed the 2015 Tax Reform Proposal into law, which included the “exit tax” provisions that would require the mark-to-market of certain financial assets and the imposition of capital gains tax on any resulting gains for certain residents in Japan moving abroad.

Foreigners will not be subject to the exit tax until five years after the effective date of the law (from 30 June 2020) regardless of the visa type that they hold or the amount of their financial asset holdings.

The exit tax laws are complicated and the expectation is additional guidance and clarification will be needed from lawmakers and Japan tax authorities. For example, vested employee stock options are not specifically excluded from the exit tax regime. As such, a later exercise of the options which have been subjected to exit tax could potentially result in double-taxation.

For more inforamtion please get in contact 03 5724 5100 or info@bannerjapan.com

Gold hit its high in 2011 at a bit over $1900. The most recent low was $1,045 in 2015 and currently it stands at around $1,250. Gold Shares have had an even wilder ride with the average gold stock down up to 70% – clearly not for the faint-hearted investor.

No one has a crystal ball and I certainly do not, but the low in gold is close – perhaps this recent rally driven by fear in Europe over the banking sector will not continue past $1,350 and we will see the lows tested one more time before we see the Gold bull market start up again. We are witnessing the beginnings of the new gold bull market and clearly there is more upside now than downside. The previous two up-legs in gold gained 300% and 177%; the previous two up-legs in gold stocks (basis HUI) put on 1,300% and 325%. Over the next while, for those who are patient, GOLD is a buy.

When you retire, do you have pension entitlements? If you have pension entitlements, are they government, or private?

If government don’t forget you have to be on the system for a number of years before you will get anything. (In Japan, 25 years; other countries also have their minimum contribution periods.) And that amount you will get looks more and more doomed the worse the demographics and the government finances become.

Your alternative is private. Which is an advantage, as it belongs to you. It sits outside Japan/your country of further residence. It’s tax and reporting sheltered while it builds up. You can direct what’s in it. And it’s yours.

Many have misgivings about signing up for a pension — the main one being “I can’t afford extra money going out each month and it is not a priority right now”.
But for how long can you afford not to afford it?

Have a look at these two examples:
Person A starts saving from age 25 with the modest some of $250 a month — at age 55 they have $ 367,037.60
Person B starts at age 40 with US$1,000 a month — at age 55 they have $ 351,891.40 if their investments generated an 8% return.

Which one is easier?

At 40 you will have hopefully have a larger income but you will also have growing costs as kids and family expenses are just rising…

Guess what happens if they each continue to 65?

A has $ 839,343.12
B has $ 947,452.98

So saver B moved ahead! But if they waited to age 45 to start then they wouldn’t, as $1000 a month for 20 years only achieves $593,075.06 at 8% return. Only 5 years makes a massive difference.

It’s best to start saving as early as possible for three main reasons:
1) You get used to that money going out
2) The power of compounding (gains on gains) means five, ten or twenty years makes a massive difference3) So you actually end up paying out a good deal less.
One advantage of a pension is one of its drawbacks – your money is locked in until at least age 55, restricting the opportunity to tap your retirement fund for other reasons. But with a Private Personal Pension you can dip into it in later years, if you have to, with minimal fees. Pay more and you can have a general purpose fund: retirement, cost of children, cost of further education degrees. Not all three may be on the horizon (although we hope retirement is), but if they are they need to be planned.

Consider a pension as an essential part of your monthly spending – like rent, energy bills or a train pass. Always pay yourself something first!

It’s your wealth that is building up – yet many people have stubborn resistance to the concept. Usually when they hit 40 or 50 and suddenly realise savings “are needed” but they have missed the early easier years!

Planning for retirement has become more challenging than it was for prior generations. Nowadays, many people over the age of 65 are continuing to work or are forced to accept a lower income in order to retire. While retirement goals are still attainable, we must adjust our retirement savings plans and be strategic in our approach; knowledge, resources and commitment are all necessary in order to reach a comfortable retirement.

Recognize the trend of people living longer in retirement. People around the world are living longer due to improved standards of nutrition, medicine and public health. While this is a good thing for individuals, we must consider those extra years spent in retirement and if we have the resources to last us through.

Cope with the large gap in retirement savings. The reality is that many people are falling short on their retirement savings goals resulting in a large annual income gap for retirees. It is important for people to commit to larger annual savings targets and consider staying in the workforce beyond traditional retirement years.

Shift the focus from the size of your nest egg to the annual income needed to maintain a comfortable retirement over the years. Nobody knows how long they are going to live and people are constantly worrying about the overall size of their nest egg and whether it will last them through retirement. Since that can be hard to gage, an easier approach is to consider the annual income required for a comfortable retirement and focus on multiplying that year after year.

Contact us to discuss various income generating options and your review your retirement plans 03 5724 5100 or email info@bannerjapan.com